UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 39155 / September 30, 1997
ADMINISTRATIVE PROCEEDING
File No. 3-9459
:
In the Matter of : ORDER INSTITUTING PROCEEDINGS
: PURSUANT TO SECTION 21C OF THE
Sam Moore, : SECURITIES EXCHANGE ACT OF 1934,
: MAKING FINDINGS AND ORDERING
Respondent. : RESPONDENT TO CEASE AND DESIST
:
I.
The Commission deems it appropriate and in the public interest that
proceedings be, and they hereby are, instituted pursuant to Section 21C of
the Securities Exchange Act of 1934 ("Exchange Act") to determine whether
Sam Moore ("Moore") committed or caused violations of Sections 10(b) and
16(a) of the Exchange Act and Rules 10b-5, 10b-6, 16a-2 and 16a-3
thereunder, in connection with the purchase on July 17-18, 1995, and an
unrelated sale on August 18, 1995 of shares of the common stock of Thomas
Nelson Inc. ("Thomas Nelson").
II.
In anticipation of the institution of these administrative
proceedings, Moore has submitted an Offer of Settlement which the
Commission has determined to accept. Under the terms of the Offer of
Settlement, Moore, solely for the purpose of these proceedings and any
other proceeding brought by or on behalf of the Commission or in which the
Commission is a party, prior to a hearing pursuant to the Commission's
Rules of Practice and without admitting or denying the matters set forth
herein, consents to the issuance of this Order Instituting Proceedings
Pursuant to Section 21C of the Securities Exchange Act of 1934, Making
Findings, and Ordering Respondent to Cease and Desist.
On the same day that this proceeding was instituted,
the Commission filed, in the United States District
Court for the District of Columbia, the related matter,
SEC v. Moore, Civil Action No. 1:97CV02256 GK (D.D.C.
September 30, 1997). With that complaint, the
Commission filed the Consent of Sam Moore, in which
(continued...)
III.
The Commission makes the following findings:
Sam Moore, 67, has been CEO, Chairman and President of Thomas Nelson
since its inception in 1961. Moore is also Thomas Nelson's largest
individual shareholder, owning more than ten percent of the company's
common stock.
Thomas Nelson Inc., which is not a respondent, is incorporated in
Tennessee, and its executive offices are located in Nashville, Tennessee.
It publishes, produces and distributes books and recorded music.
The common stock of Thomas Nelson was registered with the Commission
pursuant to Section 12(b) of the Exchange Act and traded on the NASDAQ
National Market System until early July 1995, at which time the common
stock was listed on the New York Stock Exchange ("NYSE") and began trading
under the symbol "TNM." On July 18, 1995, Thomas Nelson sold 2.875 million
shares of its common stock in a registered, secondary public offering.
SUMMARY
Moore violated Section 10(b) and Rule 10b-5 of the Exchange Act
through his placement of end-of-the-day purchases, executed on the NYSE, on
July 18, 1995. The purchases were executed at the offer side of the market
in Moore's sister's account for which Moore made investment decisions.
Because Thomas Nelson's 2.875 million share public secondary stock
offering was priced on July 18, and Moore's trades caused the price of
Thomas Nelson stock to close 1/8 of a point higher on that day, the
investors who had purchased in the secondary offering paid an additional
1/8 of a point per share, and Thomas Nelson received an additional $359,375
in proceeds from its secondary offering. Thomas Nelson has voluntarily
agreed to distribute the excess proceeds of the offering by paying 12.5
cents per share (for a total of $359,375), plus interest, to investors who
purchased shares of Thomas Nelson common stock in the offering, as
discussed below. Moore's purchases on July 18 (and a prior purchase on
July 17) also constituted violations of former Exchange Act Rule 10b-6
because the purchases were made during the restricted period. In
(...continued)
Moore, without admitting or denying the allegations in
the complaint, has offered to settle that action by
consenting to the entry of a final judgment ordering
him to pay $50,000 as a civil penalty. The complaint
does not seek an injunction against Moore.
On December 18, 1996, the Commission adopted a
comprehensive revision of Rules 10b-6, 10b-7, 10b-8,
and 10b-21, which became effective on March 4, 1997.
(continued...)
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addition, Moore failed to file a Form 4 with the Commission disclosing a
sale of Thomas Nelson common stock in August 1995, as required by Rule
16(a) of the Exchange Act.
FACTS
Thomas Nelson filed with the Commission, on June 27, 1995, a
Registration Statement on Form S-3, registering up to 2.5 million shares of
common stock to be sold to the public and granting an overallotment option
to its underwriters to purchase an additional 375,000 shares. The
secondary offering was declared effective 20 days later, on July 18, 1995.
The roadshow for the public offering began on July 10, and lasted through
July 18 and included presentations in New York City, Los Angeles, Boston,
Chicago, Milwaukee and Denver. Moore and representatives of the
underwriters were the primary participants in these presentations. Thomas
Nelson and the representatives of the underwriters had agreed to hold a
telephone conference call at 4:15 p.m. (Eastern Time) on July 18 -- fifteen
minutes after the close of the NYSE market -- to establish the final terms
of the offering, including, primarily, the public offering price.
On July 17, 1995 (Monday), at approximately 3:00 p.m. to 3:15 p.m.
(Eastern time), Moore had finished his last roadshow presentation of the
day. At approximately 3:22 p.m., Moore placed an order, on behalf of his
sister, to purchase 5,000 shares of Thomas Nelson common stock at $20 per
share, which was the offer side of the market. Moore's 5,000 share
purchase was executed at an uptick of 1/8 of a point from the previous
transaction. This purchase was the last trade of the day.
On July 18, the price of Thomas Nelson stock traded between 20 and 20
1/2 until approximately 30 minutes before the close of trading on the NYSE,
when it moved below 20. Approximately 15 minutes prior to the close of
trading on the NYSE, Moore placed an order to purchase 5,000 shares of
Thomas Nelson common stock in his sister's account at 19 7/8, which was the
offer side of the market. Only one thousand shares of the 5,000 share
order could be executed at 19 7/8. After being advised that no shares were
being offered which would fill the remainder of the order, Moore raised his
bid for the remaining 4,000 shares from 19 7/8 to 20.
After the execution of the 4,000 share order at 20, Moore remained on
the telephone with his account executive. Later in the conversation, Moore
instructed his account executive to make two additional 1,000 share
purchases at a limit of 20; one was entered at 3:55:53 and executed at
3:56:18, and the other was entered at 3:58:07 and executed at 3:58:17. The
(...continued)
Securities Exchange Act Release No. 38067 (Dec. 20,
1996), 62 FR 520. Among other things, these amendments
deemed Rules 101 and 102 of Regulation M as successor
rules to Rule 10b-6. Accordingly, this Order, at
paragraph IV., below, orders that respondent cease and
desist from violating Rule 102 of Regulation M.
======END OF PAGE 3======
latter trade was the last transaction in Thomas Nelson common stock on the
NYSE on July 18, 1995.
Representatives of the underwriting syndicate and representatives of
the pricing committee of Thomas Nelson's board of directors held the
scheduled telephone conference call approximately fifteen minutes after
Moore's last purchase, at 4:15 p.m. (Eastern Time). During the conference
call, the success of the roadshow, interest in the offering and the price
levels at which the stock had been trading on the NYSE were discussed.
Representatives of the underwriters advised the Thomas Nelson pricing
committee members that the underwriters would be willing to purchase Thomas
Nelson 2.875 million shares and offer them to the public for $20 per share,
the closing price of Thomas Nelson stock on July 18.
Moore's Failure to File Form 4
In August 1995, approximately 1 month after Thomas Nelson's public
offering, 8,750 shares of Thomas Nelson common stock, which were held in a
charitable remainder trust securities account and of which Moore was the
beneficial owner, were sold. Moore failed to file timely a Form 4 with the
Commission reporting this sale.
VIOLATIONS OF THE FEDERAL SECURITIES LAWS
Market manipulation is "[i]ntentional or willful conduct designed to
deceive or defraud investors by controlling or artificially affecting the
prices of securities." Ernst & Ernst v. Hochfelder, 425 U.S. 185, 199
(1976) (footnote omitted). The practice of placing orders at the end of
the day in order to cause the stock to close at a price higher than the
prior sale price, known as "marking the close," constitutes a manipulative
practice that violates Section 10(b) of the Exchange Act and Exchange Act
rules promulgated thereunder. See Harry S. Pack, Securities Exchange Act
Release No. 32374 (May 27, 1993), 54 SEC Docket 486; Myron S. Levin,
Securities Exchange Act Release No. 31124 (Sep. 1, 1992), 52 SEC Docket
1580; Andrew Doherty, Securities Exchange Act Release No. 29545 (Aug. 12,
1991), 49 SEC Docket 0859; Jacob Schaefer, Securities Exchange Act Release
No. 13736 (July 11, 1977), 12 SEC Docket 1128.
In addition, Exchange Act Rule 10b-6, which was in effect at the time
of the conduct described in this Order, prohibited an "affiliated
purchaser" from purchasing any security during the restricted
period. Exchange Act Rules 16a-2 and 16a-3 require that officers
On March 6, 1996, Moore voluntarily tendered to the
Company "short-swing" profits associated with this sale
and purchases made previously.
Rule 102 of recently enacted Regulation M -- which rule
was adopted to "preclude manipulative conduct by
persons with an interest in the outcome of an offering"
(continued...)
======END OF PAGE 4======
and directors report securities transactions in their own company by filing
a Form 4.
Moore placed trades at the market's close, in a manner he should
reasonably have anticipated would affect the price of the common stock.
The practice of placing orders at the end of the day in order to cause the
common stock price to uptick by purchasing on the offer side of the market
-- from 19 7/8 to 20 -- violates Section 10(b) of the Exchange Act. By
causing the price of Thomas Nelson common stock to increase from 19 7/8 to
20 at the close of the market, Moore's trades interfered with the factors
upon which market price depends. The manner in which Moore purchased
Thomas Nelson common stock -- i.e., at the end of the day on the day the
public offering was declared effective and through the mechanics of
purchasing at the offer price and thus, causing the price to uptick -- was
such that he reasonably should have anticipated that his actions would
increase the closing price. He knew or was reckless in not knowing that
his trading activity would have this effect. These trades resulted in a
1/8 of a point uptick, which increased the proceeds to the company from the
public offering by $359,375.
Moore's purchases also violated Rule 10b-6 because he purchased
securities in Thomas Nelson on July 17 and 18, 1995, during the restricted
period. Moore violated Rules 16a-2 and 16a-3 because he failed to file
timely a Form 4 in connection with the sale by a charitable remainder trust
of 8,750 shares of Thomas Nelson common stock in August 1995.
Based upon the foregoing, the Commission finds that Moore committed or
caused violations of Sections 10(b) and 16(a) of the Exchange Act and Rules
10b-5, 10b-6, 16a-2 and 16a-3 thereunder.
IV.
ORDER
In view of the foregoing, the Commission deems it appropriate and in
the public interest to accept the Respondent's Offer of Settlement.
(...continued)
-- replaced Exchange Act Rule 10b-6 and similarly
prohibits such activity. See n. 2.
======END OF PAGE 5======
Accordingly, IT IS HEREBY ORDERED, pursuant to Section 21C of the
Exchange Act, that Moore shall cease and desist from committing or causing
any violation and any future violation of Sections 10(b) and 16(a) of the
Securities Exchange Act of 1934 and Rules 10b-5, 16a-2, 16a-3 and Rule 102
of Regulation M promulgated thereunder.
By the Commission.
Jonathan G. Katz
Secretary
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